We All Have a Role to Play in Tackling Climate Change

Development and Innovation The Insurance Industry plays an important role in enhancing our resilience to climate change. Click here to find out how you can help.

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Don Forgeron

President & CEO, Insurance Bureau of Canada

As Canadians, we know how fortunate we are to have an abundance of water for the necessities of life and for pleasure.

But we also know that water can be a powerful and destructive force that demands our respect. Heavy rains, snow melt, and raging rivers are also part of the spring experience in Canada.

Many Canadians are struggling to protect themselves and their property from the destruction and damage caused by too much water in the wrong places. Flooding caused by rain, by overflowing rivers, and by rising waters along our coasts and Great Lakes destroys basements or entire homes. Household possessions and cars end up waterlogged, damaged, and total loss write-offs.

Increasingly, severe weather tied to climate change makes the problem worse. The extremes of weather and the wider temperature fluctuations resulting from a changing climate mean more and heavier rainfall, higher winds, and more storms and hurricanes. No region of the country is immune — however, the damage is escalating fastest in our high-density urban areas.

As you would expect, Canada’s home, car, and business insurers have noticed an increase in claims for property losses as a result of an increase in flooding. Thirty years ago, insurers paid out about $400 million a year in weather-related losses in Canada. Now $1 billion a year is the new normal.

The federal government has also noticed. Thirty years ago, the Disaster Finance Assistance Arrangement, which compensates flood victims, paid out about $50 million a year. The Parliamentary Budget Officer estimates that that number will reach $900 million a year for the next five years. And 75% of that is expected to be caused by floods alone. As taxpayers, we should all realize that this is not sustainable.

All of us — individual citizens, our governments, and private insurers — have a vested interest in reversing this trend. Here in Canada, flood protection should be a primary objective of any plan to increase resilience to climate change.

Canada’s insurers are working closely with governments of all orders and advocating for a whole-of-society approach to reduce the damaging effects of floods. This isn’t just a challenge for governments, and they cannot solve it alone. Whether you are a bank, a realtor, a retailer, or a consumer, everyone has a role to play.

The easiest — and expected — response for insurers would be to pass these costs along to consumers. But that’s not a long-term solution, nor is it in the best interest of Canadians. We want to play a leadership role, and that’s why we are working with key stakeholders on adapting to and mitigating the risks of climate change.

Insurers are offering new insurance products to Canadians to help them reduce their financial risks from flooding. Many insurers now offer overland flood policies along with sewer backup policies as part of their suite of homeowner’s insurance products.

As well, Canada’s private insurers are investing millions in innovative data gathering, new flood models, machine learning, and artificial intelligence to improve their risk models and to find new ways to warn clients about their weather and flood risks so they can take preventive action. IBC recently signed the United Nations Environment’s Principles for Sustainable Insurance, which reinforces our commitment to work with governments, stakeholders, and all Canadians to address risk, encourage mitigation and adaptation, and tackle the effects of climate change.

Governments are improving their coordination around flood mapping and elevating consumer awareness, and measures are under way to improve land use planning, tighten building codes, upgrade infrastructure and sewer and stormwater drainage, and preserve or restore natural stormwater buffers such as wetlands.

Water is precious and life-giving. It can also destroy. Here in Canada, our appreciation for what we have must recognize both aspects of water.

We all have a role to play in tackling climate change. We call on policymakers, the financial sector, and all Canadians to work together on mitigation and adaptation efforts and to build a more resilient country.